The Boston College Center for Retirement Research has released the results of a new analysis which reports a higher than previously-reported likelihood that Americans over age 65 will need long-term care, but a lower likelihood that they will spend a long time in a nursing home. The study, Long-Term Care: How Big a Risk?, compares recent data to a 1999 report and finds that:
- 44% of men and 58% of woman aged 65 or over will need nursing home care during their lives, as compared to 27% and 44%, respectively, reported in an earlier study.
- The average length of stay is approximately .85 years for men and 1.4 years for women, as compared with 1.3 years for men and 2 years for women previously reported.
- Half of men and 39 percent of women in nursing homes stay less than three months, the length of care (up to 100 days) covered by Medicare as long as it is deemed skilled.
- Doing the math, this means that 22% of men and 35% of women aged 65 and over will have nursing home stays longer than three months.
- But only 2% of men and 7% of women have stays longer than five years, significantly less than the 5% and 12%, respectively, previously reported.
- Only 13 percent of seniors have long-term care insurance.
- The market for long-term care insurance is crowded out by Medicaid and Medicare coverage.
While the new study may be more accurate and comprehensive than the earlier one, it also reflects a change in the marketplace with fewer seniors spending less time in nursing homes as they pursue care at home and in assisted living facilities. Consumers should probably consider long-term care insurance more as a way to pay for home and assisted living care than for nursing home care. In addition, if they do insure against the relatively small risk that they spend a long time in a nursing home, they might buy policies with extremely long elimination periods -- as long as a year -- so that they are only paying to insure against the catastrophic event of needing a lengthy period of care, self-insuring for the more likely but less expensive short-term care.
For those who do not purchase long-term care insurance, these statistics would seem to argue for postponing more drastic long-term care planning that involves outright transfers of assets or transfers into irrevocable trusts. With the need for long-term care being longer, but less acute, for most people this means that they could wait to take asset protection steps until symptoms begin to develop, paying privately for care at home or in assisted living for five years. On the other hand, other clients may feel more secure taking steps to protect assets just in case they are among the one in five men and one in three women with nursing home stays longer than three months.
The one step we would recommend to all married seniors is that they create so-called "testamentary" trusts for their spouses. These are trusts created in their wills which fall into a Medicaid (MassHealth in Massachusetts) safe harbor. Each spouse may leave funds for the other which will be available as needed but not have to be spent down for Medicaid eligibility. It is much more likely that a widow or widower will need long-term nursing home care than a married person will and Medicaid offers more protections for spouses of nursing home residents than for single residents. So, the protection is most needed for surviving spouses.